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Robert Greenstein Answers Critics on Chained CPI

The chained CPI has been receiving much attention lately after being included in the latest offers from both the GOP and White House. Some critics of the policy have been voicing their concerns, and yesterday, CRFB chimed in again to clear up the misconception that moving to the chained CPI would be regressive. Today, Robert Greenstein, president of the Center on Budget and Policy Priorities, clarified his view on the merits of including the chained CPI, thoughtfully addressing some of the criticisms of the policy. Below is a segment of his reaction:

So what is my thinking? I share concerns about the effects of the chained CPI on beneficiaries. But I think that some benefit cuts in Social Security are inevitable sooner or later. The program needs some changes to make it solvent for the long term, and the chances that policymakers will restore solvency entirely through tax increases — with no benefit-reduction component — are essentially zero. That didn’t happen in 1983, and it almost certainly won’t happen now or in the foreseeable future.

Furthermore, as in 1983, benefit changes won’t be limited to high-income beneficiaries. There are limits to how far one can cut benefits at the top without breaking Social Security’s link between payroll-tax contributions and benefits, and thereby risking undermining public support for the program. I see these factors as basic political realities, whether we like them or not.

That brings me to the key point: the chained CPI is the only Social Security benefit change that brings an increase in general tax revenues with it. Eventually, about half of the savings from the chained CPI come from revenues, and about half from Social Security and other benefit programs. The more that we raise in revenues, the less that policymakers will slash programs generally. So, this — and the fact that the chained CPI is a more accurate measure of inflation (although not necessarily for the elderly) — leads me to conclude that if policymakers can build appropriate protections into the chained CPI to protect both the oldest and the poorest beneficiaries, it’s worth considering.

Finally, I hope people reading Bob’s article don’t think I’m the sole liberal who’s open to the chained CPI. The late, revered Bob Ball — the former Commissioner of Social Security who led efforts to defend the program for half a century and was a hero and beacon on social insurance issues to so many of us — put forth several Social Security plans that included the chained CPI as a way to help restore Social Security solvency. Indeed, I first looked at the proposal after I saw that Bob Ball had included it in one of his plans. The Center for American Progress also embraced the chained CPI several years ago and included the proposal in its Social Security solvency plan.